A10 Networks(ATEN) - 2023 Q2 - Quarterly Report

Form 10-Q Filing Information Details A10 Networks, Inc.'s filing status, commission number, address, stock exchange, and outstanding shares as of July 26, 2023 Registrant Information and Filing Status Details A10 Networks' accelerated filer status, commission number, stock exchange, and outstanding shares as of July 26, 2023 - Company Name: A10 NETWORKS, INC.[2] - Commission File Number: 001-36343[2] - Trading Symbol: ATEN (New York Stock Exchange)[2] - Filing Status: Accelerated filer, filed all required reports and submitted Interactive Data Files[2] - Outstanding Shares (as of July 26, 2023): 74,110,542[4] Table of Contents Provides a structured overview of the Form 10-Q report, outlining main parts and items Report Structure Overview Outlines the Form 10-Q report's main parts, covering financial statements, management analysis, risk, controls, and exhibits Note Regarding Forward-Looking Statements Defines forward-looking statements and outlines key areas they cover Identification and Nature of Forward-Looking Statements Defines forward-looking statements by terminology and outlines their scope, including strategy, revenue, products, and profitability - Forward-looking statements are identified by words like 'believe,' 'may,' 'will,' 'estimate,' 'continue,' 'anticipate,' 'intend,' 'expect,' and similar expressions[6] - Statements concern strategy, business plan, growth management, revenue recognition, new product plans, customer purchase expectations, and profitability[7] - Also covers expectations regarding third-party relationships, tax assets, foreign earnings repatriation, future costs, gross margin variability, liquidity, capital requirements, stock repurchase, and dividends[7] Risks and Uncertainties Highlights that forward-looking statements are subject to risks, uncertainties, and assumptions, advising against undue reliance due to potential material differences - Forward-looking statements are subject to risks, uncertainties, and assumptions, including those detailed in the Annual Report on Form 10-K[8] - Important factors that could cause actual results to differ include unanticipated market changes, significant declines in global macroeconomic conditions, business interruptions, and execution risks[8] - Investors should not rely upon forward-looking statements as predictions of future events, as the company cannot guarantee their achievement[9] Investor Information and Disclosure Informs investors about official channels for disclosing material non-public information and complying with Regulation FD - The investor relations website (https://investors.A10networks.com) is used to post important information for investors[12] - Other disclosure channels include the company blog (https://www.a10networks.com/blog) and corporate Twitter account (https://twitter.com/A10Networks)[12](index=12&type=chunk) - These platforms are used for disclosing material non-public information and complying with Regulation FD[12] PART I. FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and related notes ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Presents unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows, with detailed accounting notes Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :------------------ | | ASSETS | | | | Cash and cash equivalents | $111,181 | $67,971 | | Marketable securities | $42,730 | $83,018 | | Accounts receivable, net | $69,171 | $72,928 | | Inventory | $20,438 | $19,693 | | Total current assets | $256,465 | $256,991 | | Property and equipment, net | $25,210 | $19,743 | | Total assets | $368,232 | $369,105 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $6,399 | $6,725 | | Accrued liabilities | $22,656 | $37,183 | | Deferred revenue (current) | $78,023 | $74,340 | | Total current liabilities | $107,078 | $118,248 | | Deferred revenue (non-current) | $53,590 | $52,652 | | Total liabilities | $175,294 | $188,093 | | Total stockholders' equity | $192,938 | $181,012 | Condensed Consolidated Statements of Operations Provides the company's financial performance, including revenue, gross profit, operating income, and net income for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Operations (Three Months Ended June 30, in thousands, except per share data) | Metric | 2023 | 2022 | Change | % Change | | :------------------------------------ | :----- | :----- | :----- | :------- | | Total Revenue | $65,817 | $67,973 | ($2,156) | (3.2)% | | Gross Profit | $52,354 | $54,488 | ($2,134) | (3.9)% | | Income from Operations | $12,266 | $13,143 | ($877) | (6.7)% | | Net Income | $11,626 | $10,416 | $1,210 | 11.6% | | Basic Net Income Per Share | $0.16 | $0.14 | $0.02 | 14.3% | | Diluted Net Income Per Share | $0.15 | $0.13 | $0.02 | 15.4% | Condensed Consolidated Statements of Operations (Six Months Ended June 30, in thousands, except per share data) | Metric | 2023 | 2022 | Change | % Change | | :------------------------------------ | :----- | :----- | :----- | :------- | | Total Revenue | $123,508 | $130,645 | ($7,137) | (5.5)% | | Gross Profit | $99,829 | $104,321 | ($4,492) | (4.3)% | | Income from Operations | $18,433 | $21,145 | ($2,712) | (12.8)% | | Net Income | $15,584 | $16,765 | ($1,181) | (7.0)% | | Basic Net Income Per Share | $0.21 | $0.22 | ($0.01) | (4.5)% | | Diluted Net Income Per Share | $0.21 | $0.21 | $0.00 | 0.0% | Condensed Consolidated Statements of Comprehensive Income Details the company's comprehensive income, including net income and other comprehensive income items, for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Comprehensive Income (Three Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Net Income | $11,626 | $10,416 | | Unrealized gain (loss) on marketable securities | $593 | ($201) | | Unrealized gain on cash flow hedge | $112 | — | | Comprehensive Income | $12,331 | $10,215 | Condensed Consolidated Statements of Comprehensive Income (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Net Income | $15,584 | $16,765 | | Unrealized gain (loss) on marketable securities | $1,121 | ($977) | | Unrealized gain on cash flow hedge | $147 | — | | Comprehensive Income | $16,852 | $15,788 | Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity, including stock repurchases, dividends, and net income, for the six months ended June 30, 2023 and 2022 Key Stockholders' Equity Changes (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Beginning balance (Stockholders' equity) | $181,012 | $208,888 | | Repurchase of common stock | ($6,230) | ($31,758) | | Payments for dividends | ($8,880) | ($7,663) | | Net income | $15,584 | $16,765 | | Ending balance (Stockholders' equity) | $192,938 | $194,759 | Condensed Consolidated Statements of Cash Flows Presents the company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | | :------------------------------------ | :----- | :----- | :----- | | Net cash provided by operating activities | $18,722 | $24,740 | ($6,018) | | Net cash provided by investing activities | $37,039 | $17,028 | $20,011 | | Net cash used in financing activities | ($12,551) | ($36,451) | $23,900 | | Net increase in cash and cash equivalents | $43,210 | $5,317 | $37,893 | | Cash and cash equivalents—end of period | $111,181 | $84,242 | $26,939 | Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Description of Business and Summary of Significant Accounting Policies Describes A10 Networks' business, product offerings, revenue sources, sales strategy, and confirms no material changes to accounting policies - A10 Networks, Inc. provides secure application solutions and services, including Thunder ADC, Lightning ADC, Thunder CGN, Thunder TPS, Thunder SSLi, Thunder CFW, Harmony Controller, and aGalaxy TPS[30] - Revenue is derived from products (hardware, perpetual software, subscription offerings) and services (post contract support, professional services, training)[31] - Solutions are sold globally to service providers and enterprises through a high-touch sales organization and distribution channel partners[32][34] - No material changes to significant accounting policies during the three and six months ended June 30, 2023[38] Concentration of Credit Risk and Significant Customers Discusses credit risk exposure from financial instruments and identifies significant customer revenue concentrations - Financial instruments subject to credit risk include cash, cash equivalents, marketable securities, and accounts receivable[39] Significant Customers (Percentage of Total Revenue) | Customer | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Customer A | 25% | 11% | 20% | 10% | | Customer B | * (less than 10%) | 20% | * (less than 10%) | 18% | - As of June 30, 2023, one customer accounted for 33% of total gross accounts receivable[42] 2. Leases Details the company's operating lease arrangements, including right-of-use assets, liabilities, and future payment obligations - The Company leases various operating spaces in the United States, Asia, and Europe under non-cancellable operating lease arrangements expiring through July 2027[44] Operating Lease Liabilities (June 30, 2023, in thousands) | Metric | Amount | | :-------------------------- | :----- | | Total right-of-use assets | $18,794 | | Total operating lease liabilities | $19,165 | Aggregate Future Lease Payments (as of June 30, 2023, in thousands) | Period | Amount | | :-------------------------- | :----- | | Remainder of 2023 | $2,683 | | 2024 | $5,446 | | 2025 | $4,953 | | 2026 | $4,892 | | 2027 | $2,441 | | Total lease payments | $20,415 | | Present value of lease liabilities | $19,165 | - Weighted-average remaining lease term is 3.84 years, and the weighted-average discount rate is 3.2%[49] 3. Marketable Securities and Fair Value Measurements Provides details on the company's marketable securities portfolio, including fair value measurements and unrealized gains or losses Marketable Securities (as of June 30, 2023, in thousands) | Type | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :-------------------------------- | :------------- | :--------------------- | :---------------------- | :--------- | | Corporate securities | $1,983 | — | ($3) | $1,980 | | U.S. Treasury and agency securities | $39,858 | $21 | ($99) | $39,780 | | Commercial paper | $950 | $20 | — | $970 | | Total | $42,791 | $41 | ($102) | $42,730 | Marketable Securities (as of December 31, 2022, in thousands) | Type | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :-------------------------------- | :------------- | :--------------------- | :---------------------- | :--------- | | Corporate securities | $35,137 | — | ($550) | $34,587 | | U.S. Treasury and agency securities | $28,627 | — | ($292) | $28,335 | | Commercial paper | $11,859 | — | — | $11,859 | | Asset-backed securities | $8,331 | — | ($94) | $8,237 | | Total | $83,954 | — | ($936) | $83,018 | - Total gross unrealized losses on marketable securities decreased from $936 thousand as of December 31, 2022, to $102 thousand as of June 30, 2023[51][55][56] - No other-than-temporary impairment charges were recognized during the three and six months ended June 30, 2023 and 2022[56] 4. Condensed Consolidated Financial Statement Details Presents detailed breakdowns of inventory, prepaid expenses, property and equipment, accrued liabilities, and deferred revenue Inventory (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :------------------ | | Raw materials | $13,179 | $12,771 | | Finished goods | $7,259 | $6,922 | | Total inventory | $20,438 | $19,693 | Prepaid Expenses and Other Current Assets (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Prepaid expenses | $5,315 | $5,310 | | Deferred contract acquisition costs | $6,242 | $6,144 | | Other | $1,388 | $1,927 | | Total | $12,945 | $13,381 | Property and Equipment, Net (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Property and equipment, gross | $48,722 | $42,487 | | Less: accumulated depreciation | ($23,512) | ($22,744) | | Property and equipment, net | $25,210 | $19,743 | Accrued Liabilities (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Accrued compensation and benefits | $6,597 | $19,832 | | Accrued tax liabilities | $1,864 | $1,635 | | Lease liability | $4,861 | $4,792 | | Other | $9,334 | $10,924 | | Total | $22,656 | $37,183 | Deferred Revenue (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Products | $10,870 | $7,782 | | Services | $120,743 | $119,210 | | Total deferred revenue | $131,613 | $126,992 | | Less: current portion | ($78,023) | ($74,340) | | Non-current portion | $53,590 | $52,652 | 5. Commitments and Contingencies Outlines the company's contractual obligations, including operating leases, purchase commitments, and indemnification agreements - The Company has non-cancellable operating lease arrangements totaling $19.2 million as of June 30, 2023, expiring through July 2027[67] - Open purchase commitments with third-party contract manufacturers in Taiwan totaled $19.8 million as of June 30, 2023[68] - Provides indemnifications to customers against intellectual property infringement claims; no significant impact on financial statements to date[69] 6. Equity Incentive Plans, Stock-Based Compensation and Stock Repurchase Program Describes equity incentive plans, stock-based compensation expenses, and details of the ongoing stock repurchase program - The 2023 Stock Incentive Plan was approved on April 26, 2023, replacing the 2014 Plan, with 5,600,236 shares available for future grant as of June 30, 2023[72][73] Stock-Based Compensation by Type of Award (Six Months Ended June 30, in thousands) | Type of Award | 2023 | 2022 | | :----------------------------- | :----- | :----- | | Stock awards | $6,648 | $5,635 | | Employee stock purchase rights | $566 | $678 | | Total | $7,214 | $6,313 | - As of June 30, 2023, $27.6 million of unrecognized stock-based compensation expense remains, to be recognized over a weighted-average period of 2.21 years[75] - Under the 2022 stock repurchase program (authorized up to $50 million), 437 thousand shares were repurchased for $6.2 million through June 30, 2023[81] 7. Net Income Per Share Presents the calculation of basic and diluted net income per share, including weighted-average shares outstanding Net Income Per Share (Six Months Ended June 30, in thousands, except per share amounts) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Net income | $15,584 | $16,765 | | Weighted-average shares outstanding - basic | 74,009 | 76,343 | | Weighted-average shares outstanding - diluted | 75,512 | 78,809 | | Basic Net Income Per Share | $0.21 | $0.22 | | Diluted Net Income Per Share | $0.21 | $0.21 | - 63 thousand common shares related to potentially dilutive shares were excluded from diluted EPS calculation for the six months ended June 30, 2023, as their effect would have been anti-dilutive[85] 8. Income Taxes Details the income tax provision and unrecognized tax benefits, primarily consisting of U.S. federal and state taxes Income Tax Provision (in thousands) | Period | 2023 | 2022 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $3,186 | $3,212 | | Six Months Ended June 30 | $4,150 | $4,352 | - The income tax provision primarily consisted of U.S. federal and state taxes[86] - Unrecognized tax benefits totaled $7.2 million as of June 30, 2023, with no material change anticipated over the next twelve months[86] 9. Geographic Information Provides a breakdown of total revenue by geographic region for the three and six months ended June 30, 2023 and 2022 Total Revenue by Geographic Region (Three Months Ended June 30, in thousands) | Region | 2023 Amount | 2023 % of Total Revenue | 2022 Amount | 2022 % of Total Revenue | | :------------- | :---------- | :---------------------- | :---------- | :---------------------- | | Americas | $36,921 | 56% | $38,553 | 57% | | APJ | $21,982 | 33% | $21,614 | 32% | | EMEA | $6,914 | 11% | $7,806 | 11% | | Total revenue | $65,817 | 100% | $67,973 | 100% | Total Revenue by Geographic Region (Six Months Ended June 30, in thousands) | Region | 2023 Amount | 2023 % of Total Revenue | 2022 Amount | 2022 % of Total Revenue | | :------------- | :---------- | :---------------------- | :---------- | :---------------------- | | Americas | $66,877 | 54% | $71,511 | 55% | | APJ | $37,742 | 31% | $39,403 | 30% | | EMEA | $18,889 | 15% | $19,731 | 15% | | Total revenue | $123,508 | 100% | $130,645 | 100% | 10. Revenue Details contract balances, revenue recognized from deferred amounts, and remaining performance obligations Contract Balances (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Accounts receivable, net | $69,171 | $72,928 | | Deferred revenue, current | $78,023 | $74,340 | | Deferred revenue, non-current | $53,590 | $52,652 | | Total deferred revenue | $131,613 | $126,992 | - Revenue recognized from deferred revenues at the beginning of the period was $26.1 million for Q2 2023 and $51.3 million for H1 2023[95] Remaining Performance Obligations (as of June 30, 2023, in thousands) | Period | Amount | | :-------------------------- | :----- | | Within 1 year | $78,023 | | Next 2 to 3 years | $44,010 | | Thereafter | $9,580 | | Total | $131,613 | 11. Subsequent Events Discloses significant events occurring after the reporting period, specifically a declared quarterly cash dividend - On July 26, 2023, the Board of Directors declared a quarterly cash dividend of $0.06 per share, payable on September 1, 2023[100] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Provides management's perspective on the company's financial condition, results of operations, liquidity, and capital resources Overview Reaffirms A10 Networks' position as a secure application solutions provider, detailing products, revenue, sales strategy, and financial position - A10 Networks is a leading provider of secure application solutions and services, including Thunder ADC, CGN, TPS, SSLi, CFW, Harmony Controller, and aGalaxy TPS[103] - Revenue is derived from products (hardware, software licenses, subscriptions) and services (PCS, professional services, training), primarily through distribution channel partners[104] - For Q2 2023, 56% of total revenue was from the Americas (48% from the US), 33% from APJ (19% from Japan), and 11% from EMEA[109] - Purchases by the ten largest end-customers accounted for 51% of total revenue for the three months ended June 30, 2023[110] - As of June 30, 2023, the company had $111.2 million in cash and cash equivalents and $42.7 million in marketable securities[111] - The company plans to continue investing in product development, global sales, marketing, and channel partner programs for long-term growth[111] Results of Operations Analyzes the company's financial performance, covering revenue, costs, gross profit, operating expenses, and income taxes for the periods presented Revenue Analyzes total revenue by source and customer type, highlighting changes for the three and six months ended June 30, 2023 and 2022 Total Revenue by Source (Three Months Ended June 30, in thousands) | Metric | 2023 Amount | 2023 % of Total Revenue | 2022 Amount | 2022 % of Total Revenue | Change Amount | % Change | | :------- | :---------- | :---------------------- | :---------- | :---------------------- | :------------ | :------- | | Products | $39,090 | 59% | $41,475 | 61% | ($2,385) | (6)% | | Services | $26,727 | 41% | $26,498 | 39% | $229 | 1% | | Total revenue | $65,817 | 100% | $67,973 | 100% | ($2,156) | (3)% | Total Revenue by Source (Six Months Ended June 30, in thousands) | Metric | 2023 Amount | 2023 % of Total Revenue | 2022 Amount | 2022 % of Total Revenue | Change Amount | % Change | | :------- | :---------- | :---------------------- | :---------- | :---------------------- | :------------ | :------- | | Products | $70,272 | 57% | $78,520 | 60% | ($8,248) | (11)% | | Services | $53,236 | 43% | $52,125 | 40% | $1,111 | 2% | | Total revenue | $123,508 | 100% | $130,645 | 100% | ($7,137) | (5)% | - Total revenue decreased by $2.2 million (3%) for the three months ended June 30, 2023, primarily due to a $2.3 million decrease from enterprise customers, partially offset by a $0.1 million increase from service provider customers[123][125] - Total revenue decreased by $7.1 million (5%) for the six months ended June 30, 2023, primarily due to an $8.1 million decrease from service provider customers, partially offset by a $0.9 million increase from enterprise customers[127] - Services revenue increased due to higher PCS sales from a growing installed customer base, especially in the Americas region[125][128] Cost of Revenue, Gross Profit and Gross Margin Examines changes in cost of revenue, gross profit, and gross margin for products and services for the periods presented Cost of Revenue (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | % Change | | :--------------- | :----- | :----- | :----- | :------- | | Products | $15,519 | $18,151 | ($2,632) | (14.5)% | | Services | $8,160 | $8,173 | ($13) | (0.2)% | | Total cost of revenue | $23,679 | $26,324 | ($2,645) | (10.0)% | - Products cost of revenue decreased due to lower products revenue[133] - Services cost of revenue remained relatively stable, driven by the mix of services delivered[134] Gross Profit and Gross Margin (Six Months Ended June 30, in thousands) | Metric | 2023 Amount | 2023 Gross Margin | 2022 Amount | 2022 Gross Margin | Change Amount | Change Gross Margin | | :---------------- | :---------- | :---------------- | :---------- | :---------------- | :------------ | :------------------ | | Products | $54,753 | 77.9% | $60,369 | 76.9% | ($5,616) | 1.0% | | Services | $45,076 | 84.7% | $43,952 | 84.3% | $1,124 | 0.4% | | Total gross profit | $99,829 | 80.8% | $104,321 | 79.9% | ($4,492) | 0.9% | - Products gross margin increased by 1.0% for the six months ended June 30, 2023, primarily due to the Company's cost savings efforts[137] Operating Expenses Details changes in sales and marketing, research and development, and general and administrative expenses for the periods presented Operating Expenses (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Sales and marketing | $43,202 | $44,555 | ($1,353) | (3.0)% | | Research and development | $25,630 | $27,122 | ($1,492) | (5.5)% | | General and administrative | $12,564 | $11,499 | $1,065 | 9.3% | | Total operating expenses | $81,396 | $83,176 | ($1,780) | (2.1)% | - Sales and marketing expenses decreased due to lower personnel costs[141] - Research and development expenses decreased due to lower personnel costs but are expected to increase in 2023 for strategic investments in cybersecurity technology[143] - General and administrative expenses increased for the six-month period due to an increase in personnel costs from higher headcount[144] Non-Operating Income (Expense), Net Discusses changes in interest income and other income/expense, net, for the six months ended June 30, 2023 and 2022 Non-Operating Income (Expense), Net (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | % Change | | :------------------------------------ | :----- | :----- | :----- | :------- | | Interest income | $1,635 | $304 | $1,331 | 437.8% | | Other income (expense), net | ($334) | ($332) | ($2) | 0.6% | | Non-operating income (expense), net | $1,301 | ($28) | $1,329 | (4,746.4)% | - The favorable change was primarily driven by foreign exchange gains (fluctuations in Japanese Yen vs. U.S. Dollar) and increased interest income[147] Provision for Income Taxes Presents the income tax provision for the three and six months ended June 30, 2023 and 2022, primarily from U.S. federal and state taxes Provision for Income Taxes (in thousands) | Period | 2023 | 2022 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $3,186 | $3,212 | | Six Months Ended June 30 | $4,150 | $4,352 | - The income tax provision primarily consisted of U.S. federal and state taxes[148] Liquidity and Capital Resources Assesses the company's cash position, working capital, and ability to meet future cash needs, including stock repurchases and dividends - As of June 30, 2023, the company had $111.2 million in cash and cash equivalents and $42.7 million in marketable securities[149] - Working capital was $149.4 million as of June 30, 2023[149] - Existing cash and marketable securities are believed to be sufficient to meet anticipated cash needs for at least the next 12 months and beyond[150] - Under the 2022 stock repurchase program, $6.2 million was used to repurchase 0.4 million shares during the three and six months ended June 30, 2023[152] - A quarterly cash dividend of $0.06 per share ($4.4 million) was paid in Q2 2023, with another $0.06 per share dividend declared for September 1, 2023[153] Statements of Cash Flows Analyzes cash flow changes from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | Change | | :------------------------------------ | :----- | :----- | :----- | | Operating activities | $18,722 | $24,740 | ($6,018) | | Investing activities | $37,039 | $17,028 | $20,011 | | Financing activities | ($12,551) | ($36,451) | $23,900 | | Net increase in cash and cash equivalents | $43,210 | $5,317 | $37,893 | - Cash provided by operating activities decreased primarily due to cash outflows from changes in accrued liabilities ($17.1 million) and inventory ($1.7 million), partially offset by deferred revenue ($4.6 million)[157] - Cash provided by investing activities increased significantly due to higher proceeds from sales and maturities of marketable securities ($86.8 million) compared to purchases ($44.7 million)[161] - Cash used in financing activities decreased due to lower common stock repurchases ($6.2 million in 2023 vs. $31.8 million in 2022)[162] Contractual Obligations Details the company's contractual obligations, including operating lease arrangements and uncertain tax liabilities - Contractual obligations include non-cancellable operating lease arrangements totaling $19.2 million as of June 30, 2023, expiring through July 2027[163] - The Company has $7.2 million of tax liabilities related to uncertain tax positions as of June 30, 2023, with the timing of settlement not reliably estimable[163] Critical Accounting Policies and Estimates Confirms financial statements adhere to U.S. GAAP and that no material changes occurred in significant accounting policies - Condensed consolidated financial statements are prepared in accordance with U.S. GAAP, requiring estimates and assumptions[164] - No material changes to the Company's significant accounting policies occurred during the six months ended June 30, 2023[164] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Discloses the company's exposure to market risks, specifically foreign currency and interest rate fluctuations Foreign Currency Risk Discusses exposure to foreign currency exchange rate fluctuations, particularly with the Japanese Yen, British Pound, and Euro - The company's results are subject to fluctuations due to changes in foreign currency exchange rates, primarily the Japanese Yen, British Pound, and Euro against the U.S. Dollar[165][166] - Net foreign exchange gains were $2.2 million for the three months ended June 30, 2023 (vs. $0.4 million in 2022)[167] - Net foreign exchange losses were $0.1 million for the six months ended June 30, 2023 (vs. $0.2 million in 2022)[167] - A hypothetical 10% change in exchange rates would not have a significant impact on consolidated results of operations[167] Interest Rate Sensitivity Addresses market risk from interest rate changes, primarily affecting the marketable securities portfolio, with hypothetical fair value analysis - Exposure to market risk for interest rate changes primarily relates to marketable securities, which include corporate securities, U.S. Treasury and agency securities, commercial paper, and asset-backed securities[168] - As of June 30, 2023, the investment portfolio had an aggregate amortized cost of $42.8 million and a fair value of $42.7 million[168] - A hypothetical 10% change in interest rates would not have a material impact on interest expense[168] Hypothetical Fair Values of Marketable Securities (as of June 30, 2023, in thousands) | Interest Rate Shift | Fair Value | | :------------------ | :--------- | | -150 BPS | $43,222 | | -100 BPS | $43,058 | | -50 BPS | $42,894 | | Current (0 BPS) | $42,730 | | +50 BPS | $42,566 | | +100 BPS | $42,402 | | +150 BPS | $42,238 | ITEM 4. CONTROLS AND PROCEDURES Details management's evaluation of disclosure controls and procedures and changes in internal control over financial reporting Management's Evaluation of Disclosure Controls and Procedures States management's conclusion on the effectiveness of disclosure controls and procedures as of June 30, 2023 - Management, with CEO and CFO participation, evaluated disclosure controls and procedures as of June 30, 2023[169] - Disclosure controls and procedures were concluded to be effective at the reasonable assurance level[171] - The condensed consolidated financial statements present fairly, in all material respects, and conform with U.S. GAAP[171] Changes in Internal Control over Financial Reporting Reports no material changes in internal control over financial reporting during the three months ended June 30, 2023 - No material changes in internal control over financial reporting were identified during the three months ended June 30, 2023[172] Inherent Limitations on Effectiveness of Controls Acknowledges that control systems provide reasonable, not absolute, assurance due to inherent limitations and resource constraints - Management does not expect disclosure controls or internal control over financial reporting to prevent or detect all error and fraud[173] - A control system can provide only reasonable, not absolute, assurance due to resource constraints and inherent limitations[173] - Controls may become inadequate over time due to changes in conditions or deterioration in compliance[173] PART II. OTHER INFORMATION Presents other information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits ITEM 1. LEGAL PROCEEDINGS States the company's involvement in legal proceedings and management's assessment of potential losses - The company is involved in various legal proceedings with uncertain outcomes[176] - Management assesses the probability and amount of potential losses, recording a liability when a loss is probable and reasonably estimable[176] - Judgments may differ from actual outcomes due to inherent uncertainties in legal processes, potentially impacting business and financial results[176] ITEM 1A. RISK FACTORS Refers readers to the Annual Report on Form 10-K for risk factors, noting no material changes since December 31, 2022 - Investors should review risk factors in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2022[177] - No material changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K have occurred[177] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Details the 2022 stock repurchase program and summarizes repurchase activity for the second quarter of 2023 - The Board of Directors authorized a new $50 million share repurchase program (the '2022 Program') on November 1, 2022, for a 12-month period[178] - Repurchases may occur in open market, privately negotiated transactions, or block trades, funded by existing cash and operating activities[178] Share Repurchase Activity (Three Months Ended June 30, 2023, in thousands, except per share amounts) | Periods | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) | | :------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------- | | April 1 - 30, 2023 | 282 | $14.54 | 282 | $45,899 | | May 1 - 31, 2023 | 155 | $13.78 | 155 | $43,770 | | June 1 - 30, 2023 | — | — | — | $43,770 | | Total | 437 | | | $43,770 | ITEM 5. OTHER INFORMATION Discloses CEO trading plans adopted under Rule 10b5-1(c) for selling common stock - On June 12, 2023, CEO Dhrupad Trivedi adopted a Rule 10b5-1(c) trading plan to sell up to 60,606 shares between November 7-9, 2023[182] - A previous Rule 10b5-1(c) trading plan for the CEO, dated November 10, 2022, terminated on June 30, 2023, with no shares sold[182] ITEM 6. EXHIBITS Provides a list of exhibits filed with the report, including corporate governance documents and certifications - Exhibits include Amended and Restated Certificate of Incorporation (3.1) and Bylaws (3.2)[184] - Certifications of CEO and CFO pursuant to Section 302 (31.1, 31.2) and Section 906 (32.1, 32.2) of the Sarbanes-Oxley Act are filed[184] - Inline XBRL Document Set for financial statements (101) and cover page (104) are included[184] - Section 906 certifications (32.1 and 32.2) are not deemed filed with the SEC[185] SIGNATURES Confirms the official signing of the Form 10-Q report by the company's President, CEO, and CFO on August 1, 2023 Report Signatures Confirms the official signing of the Form 10-Q report by the company's President, CEO, and CFO on August 1, 2023 - The report was signed by Dhrupad Trivedi, President and Chief Executive Officer, and Brian Becker, Chief Financial Officer[187] - The signing date for the report was August 1, 2023[187]